tv Nightly Business Report PBS February 10, 2011 12:30am-1:00am EST
>> susie: an upbeat outlook for jobs from the man holding the reigns of the economy. >> notable declines in the unemployment rate in december and january, together with improvement in indicators of job openings and firms' hiring plans, do provide some grounds for optimism on the employment front. >> tom: still, ben bernanke tells lawmakers high unemployment and low inflation are a recipe for continued support from the federal reserve. you're watching "nightly business report" for wednesday, february 9. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible byontributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. ben bernanke said today the federal reserve won't change its plans to fix the economy, because unemployment is still too high and inflation too low. but tom, many economists and investors are puzzled. should they be happy about prospects for a stronger economy or worried about signals of higher inflation? >> tom: susie, lawmakers on capitol hill had some strong opinions on this and grilled the fed chief when he testified. some pointed to signs of rising prices around the world and questioned bernanke about being
too slow to combat inflation. as darren gersh reports, bernanke was doing his best to reassure lawmakers, and everyone else, that the fed has the economy under control. >> reporter: it was the first time federal reserve chairman ben bernanke has testified before a house committee since republicans took back control. and it was clear from the questioning by budget committee chairman paul ryan that the fed will be under much tougher scrutiny. from the top, ryan said he doubted the short-term boost from the fed's bond buying program, known as quantitative easing, will outweigh the long- term pain. >> you're going to see inflation after it's already been launched and given that you have a huge balance sheet and given that we are in uncharted territory... that we're going to catch this after it is too late. >> reporter: fed chairman repeated his strong commitment to keep prices stable. and he said, for now, markets believe that. he said investors are signaling through bond purchases that they expect inflation of about 2% over next five years.
>> so there is not any indication in our financial markets that in the united states there is an expectation of inflation. >> reporter: another concern raised by republicans is that the federal reserve will eventually monetize the debt. that's what economists call it when a central bank prints money to pay off government borrowing. the end result is to flood the economy with paper money, driving up inflation and undermining savings. that's the fear, but bernanke says it will not happen. >> what we're doing here is a temporary measure which will be reversed so that at the end of this process, the money supply will be normalized, the amount of the fed's balance sheet will be normalized and there'll be no permanent increase either in money outstanding in the fed's balance sheet or in inflation. >> reporter: the fed chairman said unemployment was still high, but there were reasons to be optimistic hiring will pick up. but if the recovery falters and inflation falls further, bernanke added the fed would
have to think about additional measures to boost growth. darren gersh, "nightly business report," washington. >> susie: what do renewable energy programs, high-speed rail, and the i.r.s. have in common? they're all on a spending cut wish-list suggested today by house republicans. 70 cuts in all, with $32 billion in savings. the big ticket items? $2 billion from job training programs, $1.6 billion from the e.p.a., a billion each from high-speed rail, the "national institutes of health," and science programs. health centers, arts programs and mental health services are also on the chopping block. the proposal has virtually no chance of becoming law because senate democrats and the president will oppose it. >> tom: here are the stories in tonight's n.b.r. newswheel: the blue chips eke out a gain, keeping their winning streak alive. the dow rose six points, but the nasdaq fell eight and the s&p
500 lost three points. trading volume approached one billion shares on the big board and almost two billion on the nasdaq. coming soon, a revamp of mortgage giants fannie mae and freddie mac. on friday, the treasury will roll out a plan that could phase out fannie and freddie and trim back the government's role in the mortgage market. fannie and freddie currently own or hold 9 of every 10 american mortgages. s&p cut new jersey's credit rating because the state has a pension shortfall and a lot of debt. no comment from the garden state on the downgrade. and j.p. morgan chase is blasting charges it knew about bernie madoff's big ponzi fraud. the trustee recovering madoff's assets sued chase, saying the bank ignored warning signs on madoff's accounts there. chase say it didn't break the law, and wasn't required to investigate those accounts. still ahead, tonight's "street critique" has some lessons on investing in small and speculative stocks. hilary kramer of gamechangerstocks.com.
>> susie: big merger news here at the new york stock exchange involving the big board itself. the n.y.s.e. says it's in serious talks with germany's stock exchange, the deutsche bourse. no agreement yet, but if they do a deal deutsche would buy the n.y.s.e., creating the biggest stock exchange in the world. reportedly, the n.y.s.e.'s duncan niederauer would be the c.e.o. of the powerhouse and reto francioni, the head of the deutsche exchange, would be chairman. joining us now with more, michael wong, financial services analyst at morningstar. hi, michael. >> hello, susie. >> susie: so does this combination make sense? why would these two giants want to do this deal? >> the merger pending potential merger makes sense, exchange mergers always make sense from a business standpoint. there's usually substantial expense synergies, revenue sinner swres and usually a strategic rationale behind them.
that said, historicly when you look at mergers, they haven't made a lot sense from a financial point of view. it usually has come out that the acquirer has overpaid for the target. >> susie: what about for people who are buying and selling securities at these exchanges, what impact with a combination like this have on that investor? >> it's would probably be a good thing for the broker dealers that deal with the exchange. one of the major sources of an expense sinner swri for the exchanges would be a unifying of their technology trading platforms, it would be a one within-stop trading place for the broker dealers being able to connect to all the exchanges, trade across asset classes and trade across geography. >> susie: as you know, this news about the nyse with deutsch bourse came on the same day that the london stock exchange announced it was piing the terror on the stock exchange. if you look on the screen there, we have a bunch of combinations
that have been going on, singapore and australia, still waiting regulatory approval, the nasdaq and the norwegian exchange, the nyse which merged back in 2007 with france's euronext and the chicago merck and the cbot. so this raises the question, who's next. >> there could be another pending wave of m and a. of m and a's within industries usually do come in waves, it really becomes a keep up with the joness type atmosphere. it may become a circumstance where the minimum market cap to compete in this base will become $10 billion plus. so you might see some of the smaller players such as nasdaq omx, cboe, become acquisition targets themselves or merge with other international exchanges that really want some exposure to the u.s. or european market. >> susie: so this raises questions whether investors if they don't own these stocks,
should they buy them, again looking at this list of how the various exchange stocks did today with the nyse, euronext had a nice gain of 14%, the deutsch exchange which is rumored to join up with it up 9% and the nasdaq up 6.5%. the london stock exchange and cbo up about 4%. so are these good stocks to buy if you don't already own them? >> i would say they are trading really close to where we believe their fair value is. several months ago you had a lot of pressure at the exchange groups, lots of uncertainty in regard to regulation, and there over the past few years you had dismal volume. thatñi was the time to have picd them up. right now a lot of the easy money has already been made. >> susie: a real quick question. what would a merger of the nys scompe the deutsch bourse mean for its competitors like the nasdaq? >> i would say that the potential merger of nyse and
deutsch bourse creates a very form midable competitor, definitely it will be the premiere listing venue in the entire world, will be the go-to exchange for any local megacap. that really hurts international marketant of places such as nasdaq and other smaller exchanges. >> susie: we'll have to see how this thing plays out. we appreciate you coming omr the program tonight to explain why we are. >> thank you for having me. >> susie: thanks so much, we've been speaking with michael wong at morningstar.
>> susie: big excitement for iphone fans. the popular phone goes on sale at verizon stores tomorrow. until now, the iphone has only been available to people who use at&t's network. verizon is expected to sell as many as a million this week. while the phones will be hot sellers, what about the stocks? verizon or apple: which is the better one to buy? erika miller got some answers. >> reporter: for apple, two really is better than one. whether it's through verizon or at&t, apple is expected sell about 70 million iphones this year, enough for every man, woman and child in the u.k. analyst colin gillis says apple is changing the way people use technology, and that creates customer loyalty. >> there are so many new users who are being introduced into the apple ecosystem via the
iphone and via the ipad who are now going and saying "maybe i want to explore getting a macintosh desktop or a macintosh laptop," and these types of items carry a higher average selling price. >> reporter: almost all of the 48 analysts following the stock are bullish, anticipating a 19% gain from today's close. that's in spite of another medical leave for c.e.o. steve jobs. as well as growing competition, especially from devices using google's android operating system. >> android is the fastest- growing operating system out there. and because of the fact that it's being backed by google, it's not something that you want to trivialize and put aside lightly. >> reporter: the investment horizon is not nearly as bright for verizon. although the company is expected to sell over 10 million iphones this year, most analysts recommend putting the shares on hold. in fact, the median price target of the 26 analysts following verizion is right in line with today's close. analyst todd rosenbluth says there are better telecom stocks to own. >> s&p equity research has a sell recommendation on the shares.
we think that the stock run-in* has run up in advance and for positive expectations for the iphone. at&t trades at a cheaper multiple. >> reporter: and he's not convinced verizon will be able to grow its market share much by poaching at&t's customers. >> at&t, despite the news and the headlines, has an extremely loyal customer base in our opinion. their churn, or turnover rate, is among the lowest in the industry. >> reporter: so although the battle is heating up between at&t and verizon, wall street believes the real winner is apple. erika miller, "nightly business report," new york. >> tom: overall today tech stocks seeing a little profit taking. the consumer, though, leading the way for the market. let's get you updated in tonight's market focus. we saw a little profit taking
we saw a little profit taking for the s&p 500 and the nasdaq, but the dow continued to put up higher closes. but it may come under some pressure tomorrow. that's because dow stock cisco released its latest quarterly results after the close. here are those results, coming in two cents ahead of expectations. but profits and margins fell from a year ago. let's roll out the past 180 sessions for cisco. shares were up a fraction before tonight's news. they fell as much as 3% after the close. if that keeps up tomorrow, it still wouldn't take out the low late last year after its guidance for this quarter was disappointing. but clearly we could see some movement. rolling out a full year of trading for cisco, the stock has been stair-stepping lower, down
7% over the past 12 months. helping the dow stay in positive territory today? it was 3m. shares up 1.5%. this is highest close since october. clearly making a run. 3m raised its dividend to 55 cents. it also okayed a $7 billion buyback plan, and it's on track to have china make up 9% of its sales. leading the dow was disney, house of the mouse, jumping more than 5% after its last night's earnings. we mentioned how it could hit a new all-time high, and that's exactly where we are tonight. $43.36 for disney. consumer stocks were the strongest sector, led by polo ralph lauren. earnings were a huge surprise, better than 40 cents over estimates. strong holiday sales and pricing
helped out fiscal third quarter. the stock has been on fire this month, adding another 8% today. it broke out to a new all-time high as volume quadrupled. lots of buyers moving in as it expects the strong sales to continue. one place we saw some stiff selling was in the emerging markets. this emerging market e.t.f. fell more than 2%. two noteworthy items: it's only 20 cents away from the low hit in late january when the demonstrations in egypt began. and two: volume was almost twice its usual pace. now speaking of exchange traded funds that have been in the headlines, this is an exchange- traded note following corn, soybeans and wheat futures. all three of those grains jumped today, pushing this fund to a two-and-a-half-year high. with a 2% gain today. there's been lots of talk about food inflation. today the u.s. agricultural department finds corn supplies are at 15-year lows. soybean inventories were reduced. and wheat supplies are down 16% from a year ago.
now one company riding the wave of grains? the andersons. it operates grain elevators, ethanol plants, fertilizers and other products. share broke out to a new high on almost five times its usual volume. earnings were way ahead of estimates. finally, removed from the farm but still strong, whole foods market. and that's tonight's "market focus."
>> tom: giant stocks have been leading this rally, like the kind that make up the dow jones industrial average. but tonight's street critique guest is looking for some moves from more speculative names. she's hilary kramer, editor of gamechangerstocks.com. hillary, nice to see you. >> pleasure. >> tom: with the dow breaking out to post recession highs with the big caps, why go small? >> with the small caps we're going to find some real innovation, companies that have innovations that will be saving people's lives or saving companies billions of dollars. a lot of the big caps have already had their run. cater pillar can only sell so many more bull dozers. but i look to the small caps for doubles. i look to the big caps to try to find companies to keep in my portfolio for a decade and make 10 to 15% a year. >> tom: young of the small cap is is ymi, focuss on cancer treatment. a speculative name here, $200 million market cap, below $3 per share and a volatile stock at
that. >> the experts within the field have told me that it is the most promising da that they have seen ever, and so especially with inflammatory diseases and with head and neck cancers and pancreatic cancer so, this is a company i'm risking my money on for the up side, there's a competitor that also looks like it has promising data. so we'll see in june at the big annual oncology meeting in chicago. >> tom: and you know with those decisions you can go boom or bust, so how do you own a stock like this, with a stop loss or are you willing to see it go way down? >> you really can't do a stop loss. because what would happen is let's say you have 15% down stops will, you hit and then the next day the stocks double. so you have to allocate a very small part of your poile to risky stocks and to think of it's not as a long-term investment, but more of a casino bet really. >> tom: fair enough. we've got some e-mails from previous picks. take a look, dennis wrote teva reported good earnings and got hit for a 10% loss.
looking for a followup report. he's refering to this week's earnings disappointment. certainly some growth from a year ago, although the stock did get hit because it was slightly disappointing. do you still own it? >> i'm putting money to work in teva, and i'm watching it as it goes down and i'll still be going into this name because it a $70 fair valuation, it an israeli based company, and it's based in israel and there's this egypt contagion, even stocks in brazil have had a bad problem the last two weeks. so i really like this company, 8% is the projection from a company itself guidance for 2011 and revenue was still up 33%, plus there was one problem in a production facility in jerusalem there was a warning there, so everything is going against the company, it in a very safe biotech company for anyone who wants a more secure stock. >> tom: henry wanted an update on a company you mentioned back in december, super media, on
december 15. he writes it has poor fundamentals, negative book value and revenue growth. where do you see value? this was about 8. 50 a share when you first recommended it, had a runup, has sold off. >> okay, you made 40% on your money if you bought it based on my recommendations, if you sold at the right time. this is what i call an event driven catalyst driven trade. social media investing is hot, which is a former yellow pages that are now based on the internet that have consumer to business, consumer to consumer social media network. so now that originally stocks went up with groupon and the offer for that to be acquired, the stock came back down, the new opportunity is social media is hot again, national why the stocks have find / found its base with huffington post being bought by aol. so yes bad company fun meants, definitely a melting ice cube in your hand, but can you make some money here, if a private equity firms decides they want a
vehicle for social media investing. >> tom: do you own everything we mentioned tonight? >> yes, i do. you can follow the blog, nbr on pbs.org. you can email us, email@example.com. or you can send us a note via twitter at my feed, @hudsonnbr, or n.b.r.'s feed. and facebook too. we'll feature some of your questions next wednesday. our guest this evening's "street critique," is hilary kramer with gamechangerstocks.com. >> susie: here's what we're watching for tomorrow: quarterly results from kraft, pepsico and sprint nextel, along with weekly jobless claims and december wholesale trade. also tomorrow, imax. it's home to some of the world's biggest movie screens. we talk with imax c.e.o. richard gelfond about what's on the horizon for the entertainment giant. the "for sale" signs are coming off 11 state government buildings in california. in a controversial plan, the state was going to sell prominent buildings to private investors then lease them back for 20 years.
but governor jerry brown canceled the sale because he says it "amounted to a gigantic loan." >> tom: don't look for wikileaks to release any bombshells about bank of america anytime soon. wikileaks founder julian assange may not have any damaging information about the bank, according to reuters. that's contrary to comments he made as recently as last month. the bank has been bracing for some kind of story from wikileaks for months. investors breathed a sigh of relief. today, b. of a. was the only one of the big four u.s. banks to finish in positive territory.
>> susie: what do the new york mets, bernie madoff and the stock market have in common? tonight's "market monitor" connects the dots. he's eric schurenberg, editor in chief at cbs moneywatch. >> everybody knows that one of the biggest victims of the madoff scandal was sterling equities, the company that owns the new york mets. but according to a lawsuit filed last week by the madoff bankruptcy trustee, sterling should have seen it coming. the suit says sterling's own financial advisers repeatedly warned that madoff's returns were fishy, but were ignored. sterling partners fred wilpon and saul katz deny they could have know madoff was a crook,
but there's nothing new about investors hearing only what they want to hear. behavioral economists call it "confirmation bias," seeing people making a lot of money outweighs even the most well reasoned warning. i thought of the mets owners when a financial planner told me that he can't get his clients to rebalance their portfolios today-- to sell some of their stock winners and shift to less risky investments. stocks, after all, have been making people a lot of money. now the stock market isn't a ponzi scheme, but smart investing means doing the hard thing. some returns, if not too good to be true, are too good to last. i'm eric schurenberg. >> tom: that's "nightly business report" for wednesday, february 9. i'm tom hudson. good night everyone, and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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